If I could retire one piece of homebuying folklore, it would be the idea that you need 20 percent down to buy a house. I’ve watched that single myth keep good people renting for years while prices and rents kept climbing.
I wear two hats in this business. I’m a REALTOR and I’m also a licensed mortgage loan originator, which means I see the full picture of what buyers actually bring to closing. So let me walk you through the real numbers.
Where the 20 percent myth came from
Twenty percent down does one specific thing: it lets you skip private mortgage insurance on a conventional loan. That’s it. It was never a requirement to buy a home, and treating it like one costs people years of ownership and equity.
PMI isn’t the villain it’s made out to be either. It’s a monthly cost, it can often be removed later as you build equity, and for a lot of buyers it’s a much better deal than five more years of rent.
What down payments actually look like
Conventional loans can go as low as 3 percent down for qualifying buyers. FHA loans start at 3.5 percent and are more forgiving on credit. VA loans for eligible veterans and service members can be zero down. And here’s the one that surprises people around here: USDA loans are also zero down, and large portions of rural West Tennessee, including much of Fayette County, sit in USDA-eligible territory.
On a $300,000 home, the difference between 20 percent down and 3.5 percent down is the difference between needing $60,000 and needing $10,500. Those are two completely different conversations.
The number people forget: closing costs
Closing costs are the part that catches buyers off guard more than the down payment does. These cover things like lender fees, title work, appraisal, insurance, and prepaid taxes. They vary by loan and price point, which is exactly why I run them for buyers early instead of letting them be a surprise.
The good news is there are levers here. Sellers can contribute toward your closing costs as part of the negotiation. Some lenders offer credits in exchange for rate adjustments. This is where having your agent and your loan originator be the same person pays off, because I can structure the offer and the loan together instead of two people guessing at each other’s side.
Don’t forget the small stuff along the way
Between contract and closing, you’ll typically pay for a home inspection and possibly extra inspections like septic or well testing on rural properties. You’ll also put down earnest money when your offer is accepted, though that money gets credited back to you at closing rather than being an extra cost.
And I always want buyers to keep a cushion after closing. Draining every dollar to get the keys is how a water heater turns into a crisis. The right purchase leaves you with breathing room.
So what’s the real answer?
For a lot of first-time buyers in West Tennessee, the honest range is far closer to “a few percent of the purchase price plus closing costs” than the giant number in their head. For some USDA and VA buyers, with the right negotiation, the cash needed can get remarkably small.
But the only number that matters is yours. Your credit, your income, your target price range, and your loan options produce a specific answer, and I can get you that answer in one conversation because I can look at both the real estate side and the lending side at the same time.
If the only thing standing between you and buying is a number you’ve never actually verified, let’s verify it. You might be a lot closer than you think.
Kari Witt is a REALTOR and licensed Mortgage Loan Originator (NMLS #2265501) serving West Tennessee and the Greater Omaha area. Backyards to Barns, We’ve Got You Covered.